Question

Exercise 5-10 Compute the Break-Even Point for a Multiproduct Company [LO5-9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: Sales Variable expenses ClaimjumperMakeover $ 96,000 $ 48,000 29,800 6,200 Total $ 144,000 36,000 $ 66,200 $ 41,800 Contribution margin Fixed expenses 108,000 82,800 Net operating income $ 25,200 Required: 1. Compute the overall contribution margin (CM) ratio for the company. Overall CM ratio 75%

Answer 1

Sales:

Claimjumper = $110,400 X $96,000 / $144,000 = $73,600

Makeover = $110,400 X $48,000 / $144,000 = $36,800

Variable cost:

Claimjumper = $73,600 X $29,800 / $96,000 = $22,847

Makeover = $36,800 X $6,200 / $48,000 = $4,753

	Claimjumper	Makeover	Total
Sales	$73,600	$36,800	$110,400
Variable expense	$22,847	$4,753	$27,600
Contribution margin	$50,753	$32,047	$82,800
Fixed expense			$82,800
Net operating income			$0